Consumer Goods Industry

Industry Analysis

The retail industry is one of the rapidly expanding industry sectors as a result of international economic conditions. The online retail industry has significantly expanded because of the globalization process that determines companies to address international markets in order to maintain their competitiveness. In addition to this, the reduced costs of online retailing have determined numerous companies to focus on this business sector.

Although the online retail industry has been affected by the crisis, this situation also provided certain opportunities for companies and customers that prefer this market. The high levels of accessibility provided by online commerce has determined the significant increase of online sales. This market evolution can also be attributed to the reduced transportation costs of online retailers (Retail Blog Marketing, 2011).

In addition to this, online retailing allows companies to reduce their customer service expenses. Companies must also take into consideration environmental aspects and corporate social responsibility in order to improve their position on the market. These objectives are easier achieved in the case of online retailing, because it allows them to reduce the use of paper for shopping bags and advertising. However, this requires that companies invest in online advertising strategies. Online retailing also favors customers that are able to reduce the tie and gas required by traditional shopping.

Amazon is one of the most successful online retailers. The company provides services for buyers, sellers, and enterprises. The company’s strategy is different in the case of each category. The strategy oriented towards consumers is focused on selection, price, and convenience. In other words, the company designs its websites in order to support the sales of numerous products (the Wall Street Journal, 2011).

Amazon focuses on providing the lowest prices for the products it commercializes. The low product pricing strategy is also supported by free shipping offers. In addition to this, the company focuses on improving its operating efficiencies, on providing easy to use functionality, and high quality customer services for the local and international markets. The company understands that in order to create competitive advantage in the online retail industry, it is important to increase the efficiency of its supply chain management. As a consequence, the company has numerous U.S. And international warehouses, it outsources certain services, and uses digital delivery.

Regarding the sellers segment, the company provides certain programs that allow sellers to sell their products on Amazon’s website and on their branded websites. In addition to this, the company also focuses on the enterprises segment by providing a series of services that allow access to technology infrastructure. This helps these companies to develop their business (Amazon, 2010).

The most important market in the case of Amazon is represented by the U.S. market. The company’s tradition in this region allows Amazon to benefit from a strong position on the market and to create competitive advantage. This position allows the company to successfully address several international markets. The European market is another sector that Amazon strongly focuses on developing.

In addition to this, the Chinese market provides great opportunities and potential that can be exploited by the company. The economic development of this country provides Amazon with great opportunities that can be used in increasing the number of customers. The globalization process has determined numerous companies to outsource some of their processes and activities to cheaper destinations, like China and India. This is because these countries are able to provide large pools of skilled workers at lower prices. Therefore, Amazon can use these markets because of their production potential.

There are several areas of growth that Amazon has addressed. This refers to the expansion of product categories, international development, the production of own products and brands, the development of innovative customer services, and online development. Regarding the expansion of product categories, Amazon focuses on media categories, like books, music, and video. Most of the company’s profits are determined by these categories, given the fact that customers are interested in purchasing such products online. The reasons behind this increased interest in purchasing such media products online rely on the format in which they can be accessed. Their format allows customers to purchase and to use these products in electronic format. This also helps the company reduce storage and transportation costs. These savings can be used in investing in customer services.

However, the company has identified other product categories that can be used in addressing international markets and included them in its offers. Such product categories that can be used in increasing market share are represented by electronics, office products, grocery, jewelry, clothes, and others. Amazon identified these product categories as important opportunities in addressing European and Chinese markets.

Another important area of growth in the case of Amazon is represented by international business expansion. The reduced competition in this industry in other countries allowed Amazon to develop a strong leadership position in these markets. It seems that the company’s strategy was successful, given the fact that these markets provided higher development rates than the U.S. market. This can also be attributed to the fact that Amazon developed its international activity based on the successful strategies applied in the U.S. market.

The production of its own products helped Amazon significantly improve its position on the market. Amazon Kindle is one of the most important growth areas that the company focuses its strategy on. The innovative product allows the company to become an important player in the electronics segment. The numerous benefits Kindle provides its users have determined specialists in the field to acknowledge the product’s success (BusinessWeek, 2009).

Another service developed by Amazon in order to increase the number of customers is represented by Amazon Prime. This shipping program allows customers to benefit from unlimited shipping for the company’s products by paying certain fees. This innovation allowed Amazon to increase its number of customers on international level. However, external factors determined increased transportation costs in certain cases.

The company must develop and implement strategies that allow Amazon to counteract the effects of the increasing competition in the online retailing industry. The company’s competitors are represented by traditional, publishers, vendors, distributors, manufacturers, producers, online and ecommerce websites, indirect competitors, like media companies, web portals, comparison shopping websites, web search engines, ecommerce services providers, digital media providers, and others. These competitors benefit from strong positions on the market because they have important resources they can invest in developing their business, they have higher numbers of customers, and increased brand recognition.

These competitors are able to provide high quality products and services at lower prices. Therefore, Amazon must develop and implement strategies that can improve its competitiveness on the international market. In order to reach this objective, it is recommended that the company develops certain business alliances with local companies in international markets. This allows Amazon to benefit from the experience, customers, and knowledge regarding the markets in case. This strategy is also intended to reduce market development costs. This also helps Amazon improve its position on the market in comparison with larger companies that can invest in technological developments (Johnson, 2010).

The company’s competitiveness in the online retail industry can also be improved by focusing on reducing prices. As mentioned above, Amazon is interested in providing low prices for its products. Given the fact that most customers are price sensitive and are interested in finding cheaper products instead of focusing on brand loyalty, it is recommended that the company develops and implements strategies intended to reduce its costs. This objective can be reached by outsourcing some of the company’s processes.

The company should also invest in technological investments in order to use innovative processes that can be used in improving customer experience. In addition to this, Amazon should focus on improving its delivery strategy. This is because numerous customers are interested in shipping facilities that help them reduce delivery requirements.

Reference list:

1. Online Retail Industry Out of Recession (2011). Retail Blog Marketing. Retrieved May 3, 2011 from http://blog.retailblogmarketing.com/online-retail-industry-out-of-recession/.

2. For Amazon, Spending Binge Continues (2011). The Wall Street Journal. Retrieved May 3, 2011 from http://online.wsj.com/article/SB10001424052748703778104576287394111205626.html?KEYWORDS=amazon.

3. Johnson, M. (2010). Amazon’s Smart Innovation Strategy. BusinessWeek. Retrieved May 3, 2011 from http://www.businessweek.com/innovate/content/apr2010/id20100412_520351.htm.

4. Annual Report (2010). Amazon. Retrieved May 3, 2011 from http://www.wikinvest.com/stock/Amazon.com_(AMZN).

5. Amazon Unwraps the New Kindle (2009). BusinessWeek. Retrieved May 3, 2011 from http://www.businessweek.com/bwdaily/dnflash/content/feb2009/db2009029_964407.htm.